What's the Difference Between a £4500 Guitar and a £120 Guitar?

I think the moral of the story (to my peasant ears, at least) in comparing a Martin D-42 guitar (which costs around £4,500) versus a £120-ish Motion TD-107 guitar is that if you know how to play the guitar, you can make any damn thing with strings sound good.

But if you have better ears for audio quality than me, listen to Paul Davids compare the two guitars and see if you can hear the difference in sound. And if you can, is it worth the gaping difference in price?